Türkçe
A construction contract (eser sözleşmesi) is a contract in which the contractor undertakes to create a work and the employer undertakes to pay a price in return. All contracts under which the contractor undertakes to create a work, such as contracts for the construction of movable or immovable properties, contracts for the installation of facilities (power plants, industrial facilities, etc.) and EPC (Engineering, Procurement and Construction) contracts are regarded as construction contracts considering their legal nature.
The major risk of the employer within the scope of a construction contract is the failure of the contractor to complete the work on time or the delivery of defective work by the contractor. The liability of the contractor against the defects and the optional rights of the employer in such case are regulated under article 474 and following articles of the Turkish Code of Obligations (“TCO”).
WHAT IS DEFECT UNDER CONSTRUCTION CONTRACTS?
In the light of the decisions of the Supreme Court and doctrine opinions, the “defect” in the work can be defined as the deficiency in the qualifications that are guaranteed, agreed in the contract or must be included in the work.
WHAT IS OPEN DEFECT AND LATENT DEFECT?
Defects can be either open or latent, depending on their legal nature. If the defects in the work are of the nature that can be detected during the delivery of the work with an ordinary examination, it will be regarded as an open defect. Defects which cannot be detected as a result of the first examination and which appear at a later stage or which can only be detected if the work is utilized for a period of time are considered as latent defects.
WHAT IS THE OBLIGATION OF NOTIFICATION REGARDING OPEN AND LATENT DEFECTS?
Pursuant to Article 477 of the TCO; upon the acceptance of the work explicitly or implicitly, the contractor is released from all responsibility and merely remains liable for latent defects that were deliberately hidden by the contractor at the time of delivery and which could not be detected during duly examination.
Therefore; under a construction contract, the liability of the contractor for open defects ceases upon the delivery. The employer should examine the work during delivery and notify the contractor of any defects. If the employer fails to examine the work and to make related notification, the work is deemed to be accepted and the employer loses his right to make a claim for open defects.
It is also regulated under article 477 of the TCO that the employer should notify the contractor without delay if any latent defect has appeared later in the work. If the employer fails to examine the work and to make such notification, the work is deemed to be accepted.
The employer, who fulfills the examination and notification obligations in that respect, can exercise one of the optional rights stipulated under the TCO regarding the open and latent defects in the work.
WHAT ARE THE REQUIREMENTS TO EXERCISE OPTIONAL RIGHTS?
In order for the contractor to be held liable within the scope of a construction contract, first of all;
- The work must have been delivered by the contractor. No liability will arise for a defect in respect of a work that has not yet been completed or delivered.
- The work must have a latent or open defect.
- The employer must have fulfilled the examination and notification obligations and thus the work must not have been explicitly or implicitly accepted by the employer.
- The defect must have been caused exclusively by the actions of the contractor (use of defective materials or workmanship, faulty design, etc.) and not caused by the actions of the employer. In accordance with Article 476 of the TCO; if the defect in the work is arisen as a result of the instruction given by the employer despite the contractor’s explicit notice or it is result due to any reason which may be attributable to the employer, the employer cannot exercise its rights arising from the defective work.
WHAT ARE THE RIGHTS OF THE EMPLOYEE IF THE WORK IS DEFECTIVE?
The optional rights of the employer regarding the defective work are regulated under Article 475 of the TCO. According to this article; the employer may exercise one of the following optional rights in the presence of defect:
- Withdraw from the contract if the work is defective to the extent that the employer cannot use it or cannot be fairly compelled to accept, or if it is equally contrary to the provisions of the contract.
- To keep the work and ask for a discount in proportion to the defect.
- To ask for the work to be repaired free of charge, at the contractor’s expense, unless it requires an excessive expense.
If the work has been made on the property of the employer and its removal will cause excessive damage, the employer cannot use the right to withdraw from the contract, which is one of the optional rights.
Also; in addition to the above optional rights, since the right of the employer to request for compensation from the contractor for the damages and loses caused by the defect in accordance with the general provisions is reserved by the relevant law article, the employer who suffered an additional damage in that respect will always be able to claim compensation from the contractor.
The important point to be taken into consideration while exercising the said optional rights is to that the option to be chosen shall be binding on the employer. For example; if a price reduction is requested in a warning to be sent to the contractor following the determination of the defect, this optional right will not be waived and the right to demand free repair cannot be chosen at the next stage. Therefore; it will be appropriate to evaluate in detail the request to be made after the determination of defects and to choose the most appropriate optional right by establishing the relevant legal infrastructure.
WHAT IS THE LAPSE OF TIME FOR DEFECT LIABILITY?
Pursuant to Article 478 of the TCO and Article 30 of the Law No. 4735 on Public Procurement Contracts; if the contractor has created a defective work, the right to file a lawsuit for this reason shall expire within;
– 2 years as from the delivery date, for works other than immovable structures,
– 5 years as from the delivery date, for immovable buildings,
– 20 years as from the delivery date, if the contractor has a gross negligence, regardless of the nature of the defective work,
– 15 years as from the final acceptance approval date, if the contract is subject to the Public Procurement Contracts Law No. 4735.
Most of the contractors under construction contracts assume that they will be released from all liability for the work at the end of the warranty period stipulated under the contract. However; the duration of liability of the contractor for latent defects is not limited with the warranty period, and in case of gross negligence, the duration of the liability continues for 20 years following the delivery.
In line with the established decisions of the Supreme Court; since the reasons such as the use of fraudulent / faulty materials or workmanship, the lack of knowledge and experience required by the expertise, the construction of the building in accordance with the science and art rules are mostly considered to be gross negligence, it will not always be possible to assume that the contractors will be released from liability at the end of the warranty period or upon the expiry of 2 and 5 years as stipulated under the TCO.
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